Focus on jobs at heart of Saudi reforms

[June 07, 2016]  By Angus McDowall

JEDDAH, Saudi Arabia (Reuters) - Saudi Arabia plans to spend billions of riyals on technical training and other initiatives to boost the number of its citizens in private sector jobs, an economic reform plan released on Monday showed.

The world's top oil exporter has been pushing labor reforms for years aimed at reducing the burden of employment on the state, but Monday's plans spelled out new details of how this might be achieved in a range of economic sectors.

The National Transformation Plan (NTP), announced by government ministers late on Monday, is part of the Vision 2030 reform scheme launched in April by Deputy Crown Prince Mohammed bin Salman to prepare for a future with lower oil revenue.

It aimed to increase the number of private-sector jobs by 450,000 by 2020 and to reduce public-sector salaries as a proportion of the state budget to 40 percent from 45 percent by the same date. Unemployment among Saudis is targeted to fall to 9 percent from 11.6 percent in the next five years.

"The average public sector employee is paid about 70 percent more than the private sector average. This wage gap is one of the highest in the world and goes a long way to explaining why so few Saudis are employed in the private sector," said James Reeve, deputy chief economist at Samba Financial Group in London.

Previous labor reforms have focused on pushing companies to hire more Saudis instead of expatriates, with some effort also devoted to technical training schemes and other social tools to prompt young people to look for non-government jobs.

The new reforms aim to increase enrolment in technical and vocational training colleges to 950,000 students a year from 104,000 now, spending 1.5 billion riyals (about $400 million) to increase capacity, the NTP document showed.

The government will also spend 1.7 billion riyals on technical training facilities in schools and says it will target improvements in maths and science exam grades by 2020.

At the same time, the Civil Service Ministry has targets to decrease its payroll and spending on employee benefits by 20 percent by 2020, and to ensure that only 1 percent of new jobs by that date are in government service instead of 5 percent now.

Those reforms also carry a price tag. Restructuring civil service jobs will cost 52 million riyals by 2020 and a program to encourage government employees to become private sector entrepreneurs will cost 35 million riyals, the plan said.

WAGE GAP

Previous labor reform efforts have stumbled on social obstacles, such as the comparatively high benefits, wages, job security and social status associated with state employment and the lower cost to companies of hiring expatriates.

A man views the under-construction King Abdullah Financial District in Riyadh, Saudi Arabia May 12, 2016. REUTERS/Faisal Al Nasser
 

In the NTP, the Labour and Social Affairs Ministry has a target of reducing the cost of hiring a Saudi compared to a foreigner from being four times more expensive to only 2.8 times more expensive. Recent reforms have imposed some fees on companies that hire expatriates.

It will also aim for half of all Saudis to want a private sector job by 2020, but it provided no details on how this might be achieved.

Meanwhile, proposed reforms in other sectors aimed at boosting the private sector are also intended to create jobs for Saudis. New opportunities in mining are supposed to lead to an extra 25,000 jobs, while investment in tourism is aimed at raising hiring by 400,000 people in the private sector.

The government will also spend 117 million riyals on training more nurses and 720 million riyals on training doctors and other health practitioners to move more Saudis into public sector jobs now dominated by foreigners.

The reforms aim to increase the number of women as a proportion of the work force to 28 percent from 23 percent, and to quadruple the number of women in senior civil service roles to 5 percent, the plan said.

However, it gave few details on how this might be achieved. One figure it did give - with no further explanation - was a spending target of 2.78 billion riyals to improve transport options for working women.
 

Saudi Arabia is the only country where women are forbidden from driving and that figure shows how its strict social rules are obstructing key economic goals.

($1 = 3.7503 riyals)

(Additional reporting by Andrew Torchia in Dubai; editing by Susan Thomas)

[© 2016 Thomson Reuters. All rights reserved.]

Copyright 2016 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.